Trust and Disintermediation: Evidence from an Online Freelance Marketplace

Abstract

As an intermediary improves trust between two sides of its market to facilitate matching and transactions, it faces an increased risk of disintermediation: with sufficient trust, the two sides may circumvent the intermediary to avoid the intermediary's fees. We investigate the relationship between increased trust and disintermediation by leveraging a randomized control trial on a major online freelance marketplace. Our results show that enhanced trust increases the chance for high-quality freelancers to be hired. When the trust level is sufficiently high, however, it also increases disintermediation, which offsets the revenue gains from the increase in the hiring of high-quality freelancers. We also identify heterogeneity across clients and freelancers in their tendencies to disintermediate.

Is the division of labor limited by the extent of the market? Opportunity cost theory with evidence from the real estate brokerage industry

“…Second, this study offers the novel insight that intermediaries may not be well equipped to handle high‐value and low‐value transactions. This finding points to important managerial implications for all intermediaries facing the threat of disintermediation, which occurs when customers circumvent intermediaries to avoid fees (Gu & Zhu, 2020). Often, to deter disintermediation, managers resort to sticks and carrots by either imposing penalties or subsidizing participation (Agrawal et al, 2015; Hagiu & Rothman, 2016).…”

“…This study also contributes to the growing literature on (dis)intermediation, which has attracted much scholarly attention in recent years due to the emergence of super‐intermediaries in the digital economy (Gu & Zhu, 2020; Lobel, 2018; Parker, Van Alstyne, & Choudary, 2014). This study contrasts the uniform characterization of opportunities of prior work in this domain, which often assumes homogeneity in transaction values (Marx & Schummer, 2019), with a more granular depiction that can account for the vast heterogeneity of projects and opportunities in the digital economy.…”

Platform diffusion at temporary gatherings: Social coordination and ecosystem emergence

“…An important question for both theory and practice of platform strategy is how a platform can attract complementors. Prior research studies mechanisms such as price subsidies and architectural and governance choices, which can motivate a complementor to join or leave a platform (Armstrong, 2006; Chu & Wu, 2018; Gu & Zhu, 2020). In this paper, we show that, in a setting with poor visibility, temporary gatherings such as hackathons shape the platform adoption decisions of complementors: an attendee is more likely to adopt a platform which sponsors the gathering, which was previously adopted by more other attendees, and which is used by another attendee in a prize‐winning project at the gathering.…”

Product personalization and firm performance: An empirical analysis of the pharmaceutical industry

“…Supply-chain disintermediation, defined as the process of bypassing an intermediary (i.e., a wholesaler), by a manufacturer, for direct provision of products and (or) services to a customer is said to provide benefits to the manufacturing firm (Rossetti & Choi, 2008;Wynstra, Spring, & Schoenherr, 2015). Such benefits, which result from direct customer contact (Gu & Zhu, 2018) are salient in the context of our study and are discussed next.…”